Upon seeing this title, don’t worry, because we are still in a bull market period, and the bear market is some distance away. But why do I say this? It’s more of a personal habit or way of thinking. For instance, during a bear market, I usually prepare for the next bull market (such as consistently investing in Bitcoin monthly), while in a bull market, especially during the mid to late stages, I start preparing for the bear market.

All markets are cyclical. As ordinary individuals with no significant background and limited resources, we should try to grasp and utilize these cyclical trends as best as we can. However, the reality is that most people are unprepared for these cycles. Even those who manage to acquire low-priced tokens during a bear market or make profits during a bull market may miss opportunities or incur losses due to a lack of mental preparation.

In an article from last year (2023), we mentioned that the next bull market (this current bull market) could be the last opportunity for massive growth in the crypto market. Today, I would add that compared to historical bear markets, the next bear market could be extremely brutal.

Of course, the opportunity for massive growth means that in the next bull market, we are unlikely to see the kind of frenzied increases of tens or even hundreds of times in a single day. And an extreme bear market does not mean that this market is “dead.” It just means that during the next bear market, many projects might become more neglected, but this does not mean there are no opportunities at all. A bear market merely resets the market; it does not kill it.

One of the main reasons for this is the regulatory issues we mentioned in previous articles. In the past 1-2 years, we have already felt the increasing regulatory measures targeting the crypto market, especially the various crypto laws being enacted or prepared in the US. Some exchanges are also continuously seeking changes and trying to comply with regulatory requirements. For example, they have voluntarily delisted privacy coins like XMR, and even Binance’s CZ has personally faced the US. From the current signs, future regulations targeting the crypto field are inevitable.

Therefore, we need to start thinking about the bear market now.

1. Preparing for a Bear Market

First and foremost, position management is crucial.

I understand that many people currently have significant investments in the crypto space, some even allocating the majority of their real-world funds to cryptocurrencies. This necessitates considering several questions:

How is the yield of your current holdings performing? What is your target for selling? Why do you believe this target is achievable?

If you fail to meet your target during this bull market, or even incur losses, what will you do during the bear market?

What will you do if you encounter some issues in your real life?

The ideal is often beautiful, but reality can be harsh. Many enter this field with dreams of achieving rapid financial elevation. However, without considering or planning for the questions above, you might end up suffering significant losses. In trading markets, at least 80% of people end up losing money, so you need to make choices even more cautiously.

Since it’s hard to speak for others, I’ll continue using myself as an example. Currently, the funds I have invested in the crypto space account for less than 10% of my real-world assets. Given that I am a steadfast supporter of Bitcoin, at least 80% of my holdings are in Bitcoin. Therefore, even as an extreme Bitcoin enthusiast, I prepare two plans for the bear market, which I will share later.

Next, consider what to prepare for a bear market.

Based on past experiences, bear markets often coincide with increased occurrences of various scams, hacker attacks, and unexpected events.

Regarding scams and hacker attacks, we have already covered some safety measures and precautions for the crypto space in previous articles. As long as everyone pays attention to these aspects, there should be no major issues.

As for unexpected events, many people likely still remember the FTX collapse. Given the current situation, we believe that in the next bear market, issues related to stablecoins will likely require close attention, including the progress of the U.S. “Stablecoin Act.” We have already discussed some thoughts on stablecoins in our article from May 4th, so I won’t elaborate further here.

Let’s propose a hypothetical situation: if a stablecoin you hold loses its peg during a bear market, what would you do? Would you panic sell or continue buying more? If you haven’t experienced such an event, it might be helpful to Google the UST collapse for some background.

Therefore, if you can realize profits during this bull market and if the assets you have invested in the crypto market constitute a significant portion of your real-world assets, cashing out a portion at certain stages is one of the safer choices. As for the issue of cashing out, this topic is sensitive, so we won’t discuss it here.

If you don’t want to cash out, you have two options:

Diversify Your Stablecoins: Hold a proportionate mix of USDC, USDT, and DAI instead of only holding USDT. This diversification can help mitigate risks associated with any single stablecoin.

Convert to More Stable Cryptos: If you sense unfavorable market conditions, you can directly convert your stablecoins to Bitcoin and Ethereum. Currently, these two assets are considered the safest (despite their volatility, they are reliable in the long term).

If you have more time and energy during the bear market, aside from continuing to participate in the crypto market, you can also take some time to learn about and engage in other financial markets, such as stocks. Alternatively, if you enjoy writing, you might consider becoming a content creator like me, as producing content is one of the best ways to learn.

2. The Future is Promising, Be Patient

Having discussed the bear market, let’s return to the current market and give everyone some encouragement.

Recently, I’ve noticed that many people’s spirits seem quite low. The enthusiasm that was present a while ago, such as rushing into meme coins and participating in minting, has waned. Moreover, many people seem to lack confidence in the market’s direction. However, it’s precisely at times like these that you should seize the opportunity to research and strategize.

In any financial market, most people choose to exit or give up for roughly three reasons:

Time Dimension Abandonment: These individuals lack patience. When they don’t see market growth for a long period, they give up their holdings and exit.

Expectation Dimension Abandonment: For instance, someone might expect Bitcoin to rebound to $70,000 within a week, and when this doesn’t happen, they exit the market.

Decline Dimension Abandonment: These individuals can only accept market upswings and cannot psychologically handle any downturns. As the market consolidates or declines, they give up and exit.

Currently, we are in a stage that leans more towards the third reason. Many people fear a potential market drop. They worry that if they buy in, the market will decline, so they choose to stay on the sidelines or directly abandon their existing holdings.

Why do many people have this mindset?

I think the main reason is that most of them bought in due to FOMO (Fear of Missing Out). This FOMO leads them to buy at relatively high points in the short term, causing fear and inability to hold when the market fluctuates. This is a common trading psychology phenomenon. However, if you have been following market insights regularly, like those shared by “Huali Huawai” (a fictional name for illustrative purposes), and started dollar-cost averaging into Bitcoin in the second half of 2022, your average cost for Bitcoin should be below $30,000, making current market fluctuations negligible.

In previous articles, I frequently discussed my own position and plans. For instance, I mentioned that during this bull market cycle, I plan to sell 30% of my Bitcoin holdings when it reaches $100,000 - $120,000. Some readers have messaged me saying they plan to follow this strategy.

While I think this approach is fine, I must reiterate an old saying: each person should tailor (optimize based on others’ plans) their position management and investment strategy according to their own situation, rather than completely copying someone else’s strategy. I set the above target based on my own considerations. As I mentioned in previous articles, I made this plan back in 2022, with the goal of achieving an overall return of 3-5 times in this cycle. Reaching $100,000 for Bitcoin is not only my target position (the point to start selling in batches), but I also personally believe Bitcoin is likely to reach this level in this bull market (as I analyzed in several previous articles).

Moreover, I have a Plan B. If Bitcoin does not reach $100,000 in this cycle, I will continue to hold my Bitcoin and wait for the next cycle. This process will not affect my plan to set up a new round of dollar-cost averaging during the next bear market to continue accumulating Bitcoin.

In Summary: Invest Wisely and Be Patient

Investing is a serious endeavor that requires a well-thought-out plan. If you are a long-term investor and do not need to liquidate your holdings, you can follow a strategy similar to mine. Otherwise, when your positions reach your expectations, you should consider selling part of your holdings to lock in profits. Don’t simply wait for Bitcoin to reach $100,000, $200,000, or $1,000,000 because others say it will.

Remember, you need to achieve your goals according to your own plan, rather than waiting for others’ predictions to come true after you’ve invested your money. This could lead to uncontrollable losses. The market is inherently unpredictable; no one knows the exact all-time high for Bitcoin in this cycle or when it will occur. Any current predictions are just guesses, albeit well-informed ones.

If you prefer altcoins over Bitcoin, the challenge might be greater. As discussed in recent articles, the altcoin season’s dynamics have shifted. Although we still expect a new wave of altcoin rallies, not all altcoins will see significant increases in this bull market. Focus on projects with popular and reliable narratives, and meticulously set your position management and investment plans (e.g., setting stop-loss and take-profit levels). The days of easily making money by blindly investing in any altcoin are over.

The transition from a wild, scam-ridden, and unregulated market to a more orderly and regulated one is a sign of market maturation. For ordinary investors, as the market matures, the days of seeing investments multiply by thousands or hundreds will become a memory. Nonetheless, the crypto market is still in an early stage of development.

According to relevant data, the global stock market value surpassed $100 trillion last year (2023). Currently, the crypto market cap is only $2.32 trillion. As the crypto market becomes more compliant, especially once stablecoins are regulated, we can foresee more countries and institutional funds entering this space. For instance, if 5% of the global stock market capital moves into the crypto market, it could triple the current crypto market cap.

All this requires is time. In other words: patience.

3. Main Strategies for Earning Profits in the Crypto Market

In the second half of this article, we will outline several strategies for profiting in the crypto market.

Many things follow basic principles. For example, learning is a process of going from complexity to simplicity: “First make the book thick, then make it thin.” Investment follows a similar path. Newcomers often buy dozens of different cryptocurrencies, while seasoned investors, who have weathered market cycles, typically hold just a few, including BTC and ETH.

Research and Simplification

Take project research, for example. We previously provided a “Project Research Template.” In the most prominent position on the template, I added a key suggestion: “Gradually optimize this template to suit your needs.” Here’s how it looks:

To improve efficiency, you can use tools like the “Project Research Template,” which can significantly reduce the time needed to understand a project from days to just a few hours. However, if you have many projects to research, it can still be a substantial workload. Therefore, as you continue learning and researching, you can simplify complex strategies. This is similar to how experts can quickly gauge a person’s character by asking a few questions, thanks to their extensive experience and unique methodologies.

How can you achieve this? How can you quickly gain profit opportunities in the crypto field through research? Here are some steps:

First, Understanding Market Cycles

Understanding the cycle of a market is crucial when entering it. This is why those who ultimately make money in this field are typically those who have experienced at least one or two market cycles, while newcomers who enter during a bull market often end up losing money.

The underlying logic of the market is the flow of funds, which is often driven by people’s emotional decisions. Thus, market price changes are largely dictated by emotions like fear and greed (it’s important to remember that institutions are ultimately run by people). Because of these emotions, markets tend to follow certain repetitive patterns or cycles. Hence the saying: “History doesn’t repeat itself, but it often rhymes.”

Everyone has probably heard Warren Buffett’s famous quote: “Be fearful when others are greedy, and greedy when others are fearful.” However, few people can actually execute this strategy correctly. Similarly, many know that consistently investing in Bitcoin during a bear market and selling in batches during a bull market can yield significant returns. Yet, how many people have truly managed to hold onto their Bitcoin through such strategies in this cycle?

In any market cycle, there are numerous strategies one can employ. For instance, some aim to earn potential profits through airdrops, some seek high APY through crypto finance (which offers much higher yields compared to other financial sectors), some trade spot to earn potential profits, and some even hope to achieve overnight wealth through leveraged contracts.

Since my personal strategy mainly involves holding spot, so here we will take spot transactions as an example and continue to talk.

Tracking and Monitoring Smart Money

Tracking and Monitoring Smart Money

Tracking whale wallets was once an effective method, but as this approach became more popular, its efficiency has decreased. Many whales are now aware their wallets are being monitored and often spread their assets across multiple wallets to avoid detection. They might openly disclose transactions only when they want to send a specific signal to the market.

Several new tools have emerged over the past couple of years to aid in tracking and monitoring wallets, such as Arkham, Zerion, Mest, Alphatrace, and Apelike. Compared to monitoring well-known whale wallets, a more effective approach might be to focus on “smart money”—wallets that are the first to buy and profit from investments. By examining these wallets, you can see what other assets they are investing in, though it’s important to filter out potential internal wallets.

Here’s a summarized version of the steps previously detailed in the “Huali Huawai” articles:

First, use some DEX aggregators to find the target tokens you want to analyze. For instance, use tools like dexscreener to filter out the hottest new tokens from the past 24 hours. Then, look into the Top Traders or Holders categories within these tokens to find the wallet addresses of those who have made the most profits and traded first. As shown in the figure below.

Next, copy the corresponding wallet addresses and use the alphatrace tool to check the wallet’s trading success rate, historical profit and loss, and other held tokens. If you find that the wallet’s historical success rate exceeds 60% and the Realized PnL is greater than $300,000, then you can add this wallet to your watchlist. As shown in the figure below.

Finally, what you need to do is continuously monitor the latest trading activities of the wallets on your watchlist and identify trading opportunities for potential projects from these activities.

Third, Identify and Discover Potential Projects

By following the previous steps, you should now have a list of projects to research. Whether these projects are low-market-cap altcoins or meme coins, the fact that smart money is trading them early indicates they have a higher potential for continued growth.

However, it’s not feasible to invest in every project, and not all projects will continue to rise. Therefore, you need to conduct necessary research on the existing projects in your list to identify and discover the most promising ones for trading. At this point, you’ll need to use your optimized “Project Research Template” mentioned earlier.

As for the specific steps to identify and discover potential projects, we have already detailed this process in our article from a few days ago (May 6th). We won’t repeat it here. As shown in the figure below.

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